Kenya’s High Court has ordered the reversal of Vodacom’s $1.6bn purchase of a 15 per cent stake in Safaricom, dealing a major blow to the South African telecoms group and raising questions over the Kenyan government’s programme of state-asset sales.
The court ruled that the disposal of the government’s holding in Safaricom, Kenya’s most valuable listed company, contravened the country’s constitution and applicable law and ordered that the shares be restored.
The ruling puts in doubt a transaction completed only months ago in which Vodacom paid the Kenyan government about KSh204bn ($1.6bn) for the 15 per cent holding. The deal increased Vodacom’s effective ownership of Safaricom to about 55 per cent and strengthened its control over the company behind Kenya’s dominant M-Pesa mobile money platform.
The decision is a setback for President William Ruto’s administration, which has sought to raise cash from government assets as it grapples with high debt-service costs and limited room for additional borrowing.
The Safaricom sale was one of the largest transactions in that programme. The government had argued that disposing of part of its holding would unlock value from an investment while providing funds for public spending and debt management.
The court’s order creates a potentially complicated unwind because the government has already received the purchase proceeds and Vodacom has completed the acquisition.
Vodacom completed the purchase on June 30 after Kenya’s Court of Appeal lifted an earlier injunction that had prevented the transaction from going ahead. The appellate court’s decision allowed the sale to proceed while the wider constitutional challenge remained before the courts.
Vodacom had also acquired an effective 5 per cent interest in Safaricom from Vodafone, bringing its overall effective ownership to roughly 55 per cent. The Kenyan government retained a 20 per cent stake following the disposal.
The High Court’s decision now reopens questions over the legal basis on which the state can dispose of strategic assets and the extent to which constitutional requirements, including transparency and public participation, must be satisfied before such transactions can be completed.
The case is particularly significant for Kenya’s capital markets. Safaricom is one of the country’s most important corporate assets and accounts for a substantial share of activity on the Nairobi Securities Exchange. Its M-Pesa business is also central to Kenya’s digital-payments economy.
The government has been under pressure to find alternatives to borrowing as it seeks to finance infrastructure and other expenditure while containing public debt. Asset sales have consequently become an increasingly important part of its fiscal strategy.
The reversal of the Safaricom transaction could complicate that approach, particularly if other proposed disposals face similar legal challenges.
The immediate financial consequences will depend on how the court’s order is implemented, including the treatment of the KSh204bn already paid by Vodacom and the process for restoring the shares.
The ruling is also likely to increase scrutiny of the government’s handling of future privatisations and asset disposals, particularly where the assets involved are strategically important or widely held by Kenyan investors.
For Vodacom, meanwhile, the judgment introduces uncertainty into a transaction that had been intended to consolidate its control of Safaricom and deepen its position in one of Africa’s most sophisticated mobile-money markets.